- General
- August 1, 2023
- 4 minutes read
Trucking Giant Yellow Corp Shuts Down, To File For Bankruptcy
Yellow Corporation (NASDAQ: YELL), an American trucking giant, has ceased operations and is preparing to file for bankruptcy, according to…
Yellow Corporation (NASDAQ: YELL), an American trucking giant, has ceased operations and is preparing to file for bankruptcy, according to the Teamsters Union representing most employees. Yellow has recently struggled with significant losses and heavy debt, so the shutdown isn’t shocking.
- Yellow Corp, formerly known as YRC, is a major logistics company. It specializes in “less than truckload (LTL)” shipping, referring to relatively small loads or quantities of freight of between 150 and 15,000 pounds.
- Yellow ceased operations on Sunday, July 30, 2023, after years of financial problems. The Teamsters Union was the first to break the news, and Yellow hasn’t yet released an official statement.
Yellow is the third-largest LTL shipper in the U.S., having delivered over 14 million items in 2022. Its customers include some of America’s biggest retailers, such as Walmart and Home Depot. The company has struggled under a high debt load that it incurred to fund a string of acquisitions over the past two decades. As of March, it had $1.5bn in outstanding debt, including $729mn owed to the U.S. federal government.
Yellow received a $700mn loan from the U.S. Treasury Department in 2020 to stay afloat as the Covid-19 pandemic dented logistics businesses. The government issued the loan on the grounds that Yellow was “critical to maintaining national security.” It received 29.6% of Yellow’s outstanding shares as part of the debt package.
According to a U.S. government-appointed watchdog, Yellow had repaid $55mn in interest and $230 in principal as of March 2023. With the shutdown and imminent bankruptcy filing, the government is bound to take a significant haircut on its loans and equity stake.
Ironically, Yellow’s stock rose 150% on Monday following the news of its shutdown, giving it a market capitalization of $91mn. Investors are seemingly hopeful that there’s gold to be salvaged within Yellow Corp’s scraps.
- The Teamsters Union said Yellow Corp’s shutdown will put 30,000 workers out of their jobs, 22,000 of whom are members. The Union had been at loggerheads with Yellow Corp lately. The company filed a lawsuit against Teamsters this June accusing it of blocking its restructuring plan. Teamsters called the accusation “baseless.”
- Teamsters pressed Yellow to renegotiate its multiyear contract with employees, which includes wages and pension payments. In June, Yellow sought to delay two pension-fund payments, putting it $50mn behind in agreed contributions, but Teamsters threatened a mid-July strike if Yellow didn’t make the due payments.
- The disagreement spooked customers, adding more woes to Yellow, whose cash holdings fell to $100mn in June from $325mn last December; the company was struggling with declining shipping demand that has depressed shipping rates this year.
Yellow will likely head for a restructuring, something the company is familiar with. In 2011, it completed a financial restructuring that wiped out shareholder equity, and employees agreed to pay cuts to help it stay in business.
Yellow has been through many ups and downs in its near-century history. It traces its origins to the Yellow Transit Freight Lines, founded in 1929 to ship freight with mules. It changed its name to Yellow Corporation in 1992 after creating a parent company to house several transportation businesses.
- Yellow Corp brought in $5.2bn in revenue in 2022 and a small net income of $22mn, compared to a $109mn loss on $5.1bn in revenue in the previous year.
